Positive and Negative Sides of Shadow Economy
Journal Title: Globalization and Business - Year 2016, Vol 1, Issue 1
Abstract
Shadow economy is a part of national economy which is not controlled by the state, and consequently it is not taxed. Shadow economy is also named by the term “informal economy” or “economy in shadow”. These terms originate from English language shadow economy. Shadow economy influences all participants of country’s economy: The state does not get income from it; Economy units have difficulties in business in non-liberal competitive environment; Customers have not guarantee of suitable quality on the products produced by this share Reasons which helped shadow economy being founded are low tax ethics of economy units,attempts to hide incomes,etc. Heavy and multi-sided tax system causes production to be turned into shadow production. Besides it should be mentioned other expenses which are connected with legal producing: such as ex- penses for cash register, expenses for social safety of employees,fixed minimal wages standards, etc. The wold experience shows that in order to decrease or root out shadow economy it will be better systemic changes than repressions. The most dangerous quality of shadow economy is its negative influence on competitiveness and accordingly on national economy. Firms existing in shadow economy become more competitive than those which are legal ones. Although shadow economy has so many negative sides,it should be mentioned that it has positive sides too which help it to survive. That”s why we come across such term in economy “shadow economy is ointment for economy”. It means that shadow economy gives possibility to be active in those shares and structures where legal firms are disable. In any way shadow economy itself is fully negative and it is necessary to fight with it. It should be separated some methods for fighting against it: To simplify and improve tax system; To make light fiscal load; To decrease and abolish non-economic expenses connected with business activities; To decrease and minimize regulations such as concessions and permissions; Maximal reduction of firms” audit and control: _ Development of non-cash system.
Authors and Affiliations
Lia Pitiurishvili, Ambrosi Grishikashvili
Keywords
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